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CIRCULAR No.26/1998/TT-BTC OF MARCH 4, 1998 OF THE MINISTRY OF FINANCE GUIDING THE PROCEDURES FOR GRANTING CERTIFICATES OF ELIGIBILITY FOR INSURANCE BUSINESS ACTIVITIES

Pursuant to Decree No.100-CP of December 18, 1993 of the Government on insurance business;

Pursuant to Decree No.74-CP of June 14, 1997 of the Government on amendments and supplements to a number of Articles of Decree No.100-CP of December 18, 1993 of the Government on insurance business;

The Ministry of Finance hereby guides the procedures for granting Certificate of Eligibility for Insurance Business Activities as follows:

I. GENERAL PROVISIONS

1. Pursuant to Article 1 of Decree No.100-CP of December 18, 1993 of the Government on insurance business, the scope of application of the Decree covers all commercial insurance activities. Health insurance prescribed in the regulation issued together with Decree No.299-HDBT of August 15, 1992 of the Council of Ministers (now the Government) and Decree No.47-CP of June 6, 1994 of the Government amending a number of Articles of the Regulation on Health Insurance issued together with Decree No.299-HDBT and social insurance prescribed in the regulation issued together with Decree No.12-CP of January 26, 1995 of the Government shall not be governed by Decree No.100-CP and Decree No.74-CP.

2. Subject to Decree No.100-CP and Decree No.47-CP are all insurance enterprises, insurance brokerage organizations and insurance agents conducting insurance business activities on the territory of Vietnam.

3. The Ministry of Finance shall be the agency performing the function of State management over insurance business activities. Insurance enterprises and/or insurance brokerage organizations wishing to conduct insurance business activities shall be granted the Certificates of Eligibility for Insurance Business Activities (hereafter referred to as the Certificates for short) by the Minister of Finance.

After being granted the Certificates, insurance enterprises and insurance brokerage organizations shall have to fill the procedures for enterprise establishment, business registration and application for investment licenses (for foreign organizations) in accordance with provisions of the current laws.

Domestic and foreign economic organizations which have not been granted the Certificates and the business registration certificates or investment licenses (for foreign organizations) shall not be permitted to conduct insurance business activities.

II. LICENSING CONDITIONS AND PROCEDURES

1. The certificate

The certificates granted by the Ministry of Finance to insurance enterprises and insurance brokerage organizations shall be the legal document acknowledging the rights of insurance enterprises and insurance brokerage organizations to conduct insurance business activities.

The certificates shall be the prerequisite for competent bodies to permit the establishment of the enterprise or to grant investment licenses and business registration certificates in respect of insurance business activities.

2. Principles for granting the Certificate

Certificates shall be granted to insurance enterprises and insurance brokerage organizations on the following principles:

- Compatibility with the orientation and strategy for the development of Vietnam's insurance market;

- Compatibility with the demand of the national economy for the types of insurance to be provided by the insurance enterprises;

- Compatibility with the demand for development of certain types of insurance in each locality;

- Ensuring a stable insurance market without causing any fluctuation thereto;

3. Conditions for being granted the Certificate

Conditions for the Ministry of Finance to consider and grant Certificates to insurance enterprises and insurance brokerage organizations shall be specified as follows:

3.1. General conditions:

- To have clear objectives and areas of insurance business activities: clearly stating the scope of operations, term of operations and types of operations to be conducted;

- To have the statutory capital (excluding loans) at least equal to the legal capital level corresponding to each kind of enterprises as provided for in Article 22 of Decree No.100-CP;

- To have form of organization of business operations as prescribed in Article 2 of Decree No.100-CP;

- To have office suitable to business operations with a clear address and the legality of such office;

- The manager is possessed of the managerial capability and professional skills in respect of insurance, must graduate from an official training course of an economics college and must have at least 3-year experience in business administration or State management ;

- To conform with the principles for granting the Certificate.

3.2. For State-owned insurance enterprises, apart from meeting the general conditions prescribed in Point 3.1, they must be permitted by the competent level to use capital for purposes of insurance business activities.

3.3. For joint stock companies, apart from meeting the general conditions prescribed in Point 3.1, the founding-members of the company must obtain from the competent level the certification of the legitimacy of their contributed capital.

3.4. For joint venture companies, in addition to the general conditions prescribed in Point 3.1, they must satisfy the following conditions:

- The parties to a joint venture must be the organizations which have been legally operating at least for three years up to the moment of submission of application dossiers in accordance with provisions of the current laws of the country where they are headquartered and their financial status must be certified by lawful financial or auditing bodies to be healthy and in normal conditions;

- The parties to the joint venture must not have conflicting interests;

- At least one of the parties to the joint venture must be the organization conducting insurance business activities;

- The foreign party must be the organization which has been permitted to establish its representative office in Vietnam for at least 3 years, has not violated any provisions of Vietnamese law and has positively contributed to the development of Vietnam's insurance market;

- The area(s) planned for joint venture must conform to the capability and experience of the parties planning to join the venture;

- Contributed capital of the domestic partner(s) must be certified by the competent level to be legitimate;

- The joint venture must have plans for training Vietnamese employees and give priority to the recruitment thereof, including for key management posts in the joint venture.

3.5. For the branches of foreign insurance organizations and 100% foreign invested insurance companies, in addition to the general conditions prescribed in Point 3.1, the following conditions must also be met:

- They must be the organizations which have been lawfully operating at least for 5 years up to the moment of submission of application dossiers under the provisions of current laws of the country where they are headquartered and their financial status must be certified by lawful financial or auditing bodies to be healthy and in normal conditions;

- They must be the organizations which have been permitted to establish representative offices for at least 3 years, have not violated any provisions of Vietnamese law and have positively contributed to the development of Vietnam's insurance market;

- They must have plans for training Vietnamese employees and give priority to the recruitment thereof, including for key management posts in the joint venture.

4. Dossiers on the application for the Certificate

4.1. For the State-owned enterprises:

Enterprises applying for the Certificates shall have to submit a set of original dossiers in Vietnamese to the Ministry of Finance. In addition to the documents prescribed in Clause 1, Article 18 of Decree No.100/CP, such a dossier of application for the Certificate shall also include:

- A document from the agency that has decided the establishment of the enterprise, permitting the enterprise to engage in insurance business activities;

- An explanatory document on the sources of capital for the establishment of the enterprise with certification by the competent body;

- Documents on the lease, purchase or use of working office.

4.2. For joint stock companies:

A set of original dossiers in Vietnamese applying for the Certificate shall be submitted to the Ministry of Finance. In addition to the documents prescribed in Clause 1, Article 18 of Decree No.100/CP, such a dossier of application for the Certificate shall include:

- The minutes of a meeting recording the opinions of the founding-share-holders on the establishment of the joint stock company;

- Certification by the competent body of the legitimacy of capital sources used for the establishment of the company;

- Documents on the lease, purchase or use of working office.

4.3. For joint venture companies:

The original dossier of application for the Certificate submitted to the Ministry of Finance shall be made in 2 sets: one in Vietnamese and one in English. In addition to the documents prescribed in Clause 2, Article 18 of Decree No.100-CP, such a dossier of application for the Certificate includes:

- A document of the competent level permitting the Vietnamese party to enter into the joint venture;

- An explanatory document on the sources of the Vietnamese party(ies)'s capital contributed to the joint venture with certification by the competent body;

- Documents on the lease, purchase or use of working office of the joint venture.

The copies of any documents must be legally certified by the Public Notary of the localities where the parties to the joint venture are headquartered.

The Vietnamese translation of any documents must be legally certified by the Public Notary of Vietnam or by the translation organizations lawfully operating in Vietnam.

4.4. For branches of foreign insurance organizations and 100% foreign invested insurance companies

The original dossier of application for the Certificate submitted to the Ministry of Finance shall be made in 2 sets: one in Vietnamese and one in English. In addition to the documents prescribed in Clause 3, Article 18 of Decree No.100-CP, such a dossier of application for the Certificate includes:

- Documents on the lease, purchase or use of working office of the company in Vietnam;

Copies or translations of the documents must be legally certified by the Public Notary of the origin country(ies).

The Vietnamese translation of any documents must be legally certified by the Public Notary of Vietnam or by the translation organizations lawfully operating in Vietnam.

5. After receiving the dossiers in full, the Ministry of Finance shall consider and grant Certificates within the time limit prescribed in Article 21 of Decree No.100-CP.

If after 12 months from the date of being granted the certificates, any insurance enterprises or insurance brokerage organizations fail to complete the procedures to establish the enterprises or to complete business registration or fail to obtain the investment licenses, they must inform the Ministry of Finance of the reasons and completion schedule and apply for extension of their Certificates. A Certificate shall be extended only once for a term not exceeding 6 months. Upon the expiration of such term, the concerned insurance enterprises or insurance brokerage organizations shall have to file the procedures applying for new Certificates.

Insurance enterprises and insurance brokerage organizations shall have to pay a fee for the Certificate in Vietnam dong or foreign currency(ies) as provided for in Article 21 of Decree No.100-CP. This fee shall not be included in the legal capital of the insurance enterprises or insurance brokerage organizations as stipulated in Article 22 of Decree No.100-CP.

The collection, management and use of fees for Certificates shall comply with Circular No.96TC/CDTC of November 18, 1994 of the Ministry of Finance guiding the collection, management and use of fees for Certificate of Eligibility for Insurance Business Activities.

III. OPERATIONS AND ALTERATION IN THE CONTENT OF OPERATIONS OF INSURANCE ENTERPRISES OR INSURANCE BROKERAGE ORGANIZATIONS

1. Insurance enterprises and insurance brokerage organizations shall have to operate in conformity with the content and scope provided for in their granted Certificates.

In cases where an insurance enterprise or an insurance brokerage organization wishes to change the contents of the granted Certificates. It shall have to submit an official application to the Ministry of Finance for supplements or amendments to the granted Certificate or for a new Certificate, clearly stating the reasons for such supplements, amendments or granting of a new Certificate. For each time of amending or re-granting of the Certificate, the concerned insurance enterprise or insurance brokerage organization shall have to pay a fee of 10 million VN dong (or an amount of foreign currency with the equivalent value). Within 30 days from the date of receipt of full dossiers, the Ministry of Finance shall have to approve or reject such amendments or supplements.

Pending the decision of the Ministry of Finance on approval or refusal of the amendments or supplements to the Certificate or the granting of new certificates, the concerned insurance enterprises and/or insurance brokerage organizations shall not be permitted to conduct insurance business activities beyond the scope prescribed in their current certificates.

2. Insurance enterprises only conducting life or non-life insurance activities and insurance brokerage organizations shall not be entitled to establish more than one branch in a city.

While applying for the establishment of its branch (or other forms of organizations permitted to conduct business activities), an insurance enterprise or an insurance brokerage organization shall have to submit an application to the Ministry of Finance together with the following documents:

- A written assessment of the operations, growth rates of the enterprise's turnover in the previous period;

- Survey of insurance demand in the locality where the enterprise applies for the establishment of its branch;

- Business plans of the branch for the 3 following years which clearly state the business areas and scope of the branch and its estimated turnover;

- Projected location of the branch's head office;

- A draft plan for personnel, including managerial and professional personnel, of the branch;

- Curriculum vitae, academic degrees and certificates of the branch's manager;

3. Application for development of new insurance operations:

In the course of its operations, an insurance enterprise may request the permission from the Ministry of Finance to develop new type of insurance operations in addition to those provided for in its Certificate.

When applying for the development of a new type of insurance operations, an insurance enterprise shall have to submit to the Ministry of Finance a dossier which includes the following documents:

- The application for development of new insurance operation;

- Survey of customers' demand for such type of insurance;

- The explanation on the material and technical foundations, number of the staff, financial conditions for such insurance operation;

- Rules, provisions, premium index, insurance commissions of the planned insurance operation;

- Explanation on the basis for determination of premiums, methods of deduction for establishment of occupational reserve funds for the planned insurance operation;

- Business plan for the 3 following years in respect of the planned insurance operation.

IV. MANAGEMENT AND SUPERVISION OF INSURANCE BUSINESS ACTIVITIES

1. Control:

In addition to the control of State functional bodies in accordance with provisions of the current laws, insurance enterprises and insurance brokerage organizations shall also be subject to the control and supervision of the Ministry of Finance over their management, payment capability, property management, implementation of provisions, premium index, insurance commissions already registered with the Ministry of Finance and their observance of provisions of the current laws. The inspection by the Ministry of Finance must not affect the normal operations of insurance enterprises and insurance brokerage organizations. Any violations of the regulations on management shall be handled according to the provisions in Clause 10, Article 1 of Decree No.74-CP of June 14, 1997 of the Government on amendments and supplements to a number of Articles of Decree No.100-CP December 18, 1993 of the Government on insurance business, depending on the seriousness of the violations.

2. Restriction, suspension and withdrawal of Certificates:

2.1. Certificates of insurance enterprises and/or insurance brokerage organizations may be restricted by the Ministry of Finance in the following circumstances:

- Failure to comply with terms and/or insurance premium index, which have been approved by the Ministry of Finance;

2.2. Certificates of insurance enterprises and/or insurance brokerage organizations may be suspended by the Ministry of Finance in the following circumstances:

2.2.1. Serious violation of provisions of Vietnamese law, Decree No.100-CP December 18, 1993, Decree No.74-CP June 14, 1997 in their business operations;

2.2.2. Their financial capability fail to fulfill their undertakings towards the insured persons.

2.2.3. Suspension of operations without permission while the Certificate is still effective.

2.3. Certificates of insurance enterprises and/or insurance brokerage organizations may be withdrawn by the Ministry of Finance in the following circumstances:

2.3.1. Failure to fully satisfy conditions for the commencement of their operations or failure to operate within 12 months from the date of being granted the Certificate or after the expiration of the extended term approved by the Ministry of Finance;

2.3.2. Being unable to further satisfy the conditions when being granted the Certificate;

2.3.3. Upon dissolution or bankruptcy;

2.3.4. Upon merging

2.3.5. Upon split-up or consolidation which leads to the loss of legal person status of the concerned insurance enterprises and/or insurance brokerage organizations or make them unable to further satisfy conditions when being granted the Certificate.

2.3.6. In addition to the above-mentioned cases, Certificates of branches of foreign insurance enterprises and/or brokerage organizations may be withdrawn when such foreign insurance enterprises and/or brokerage organizations have their licenses withdrawn and cease to operate in their origin country(ies).

2.4. Certificates may be restricted, suspended or withdrawn in respect of one or more types of insurance operations, depending on the seriousness of the violations.

If any Certificates are restricted, suspended or withdrawn in respect of one type of insurance operations, the concerned insurance enterprises shall not be entitled to sign new insurance contracts for such type of insurance operations, but must still be responsible for the contracts signed previously.

The Ministry of Finance's decision(s) on restriction, suspension or withdrawal of the Certificates shall be sent to relevant bodies for further dealing with the concerned insurance enterprises and/or insurance brokerage organizations.

3. Dissolution, bankruptcy, split-up, merger, consolidation

When an insurance enterprise or an insurance brokerage organization terminates its operations or is dissolved, liquidated, split up, merged or consolidated, it shall have to establish a Board of Liquidation. From the date of its establishment, the Board of Liquidation shall represent such insurance enterprise or brokerage organization before competent bodies of Vietnam in determining the responsibilities and dealing with property of the parties concerned in accordance with Vietnamese law.

The bankruptcy of insurance enterprises and insurance brokerage organizations operating in Vietnam shall comply with Law on Enterprise Bankruptcy adopted by the National Assembly of the Socialist Republic of Vietnam, IXth Legislature, at its fourth session on 30 December 1993, and guiding documents.

V. ORGANIZATION OF IMPLEMENTATION

This Circular take effect 15 days after its signing and replace Circular No.46-TC/CDTC of May 30, 1994 of the Ministry of Finance guiding the implementation of Decree No.100-CP of December 18, 1993 of the Government on insurance business.

All previous regulations which are contrary to this Circular are hereby annulled.

In the course of implementation, any obstacles and difficulties shall be promptly reported to the Ministry of Finance for consideration and amendments.

For Minister of Finance

Deputy Minister

LE THI BANG TAM